Starting with the development of two facilities, a Northbrook, IL-based apartment developer is breaking into the self-storage business.
Banner Storage Group, a subsidiary of Banner Apartments, closed in April on its first self-storage development site. Banner paid $2.2 million for a seven-story, 106,000-square-foot warehouse in Lynn, MA, that it will convert into a storage facility. Renovation work has started at the site, which is 11 miles north of downtown Boston.
Banner also recently closed on a site in Chicago where it will develop an 118,000-square-foot storage facility with 1,200 units. The price tag for the project will be about $10 million, including acquisition costs.
John Nikolich, executive vice president of Banner Storage, said the company hopes to develop five locations each in the Boston and Chicago markets over the next couple of years. The firm also is seeking development opportunities in the Miami area.
“We are focusing on urban infill markets, ideally with population growth, job growth and income growth,” Nikolich said.
Breaking into storage
Banner Apartments, which owns and manages more than 6,000 apartments in several states, launched its self-storage subsidiary last July. The group is led by President Gary Delaney, who spent seven years leading acquisition and development for Safeguard Properties and two years as development manager at Shurgard Storage Centers, now a part of Public Storage.
As long as everyone is carefully looking at supply-and-demand dynamics, there is a limited window of opportunity to do self-storage development and there might be for a couple years more.
— John Nikolich, executive vice president of Banner Storage
Nikolich, who has been with Banner since 2012, has extensive financing experience in real estate, including the self-storage sector. Nikolich said the self-storage industry represents an ideal opportunity for diversifying Banner’s assets.
“As long as everyone is carefully looking at supply-and-demand dynamics, there is a limited window of opportunity to do self-storage development and there might be for a couple years more,” Nikolich said.
Nikolich said Banner Storage will hire a third-party management company to run its self-storage facilities.
“We own 6,000 units of multifamily. Those are self-managed, and that works out great,” Nikolich said. “On the storage side, the economy of scale doesn’t make a lot of sense [for self-management].”
Historic opportunity in Massachusetts
For its first project, Banner is renovating a seven-story warehouse at 154 Pleasant St. in Lynn, MA. The building, dating back to 1906, has been used for the storage of household goods and general merchandise since 1924.
Instead of being operated as a self-service facility, tenants delivered their belongings to the loading dock, and laborers unloaded the items and put them into storage. Banner Storage bought the building from C. Bain Moving and Storage, which had operated there since 1930. Customers weren’t allow to enter the facility.
Banner Group will create traditional customer-accessible storage units in the warehouse. A section of the building features original terra-cotta-walled storage units equipped with fireproof doors made of steel. Some of the old units will be kept to maintain the building’s historical significance.
Nikolich said the site benefits from having only two competitors nearby: a Public Storage facility and a U-Haul facility. Both of those facilities are nearly 100 percent occupied, he said.
The project is scheduled for completion this fall.
From the ground up in Chicago
In Chicago, Banner will break ground in July on a six-floor storage facility at 1809 W. Devon Ave.
“It’s in our backyard,” Nikolich said. “Part of the logic is everyone here knows the area, and it is easy for us to get it up to speed.”
Nikolich said the estimated $10 million project is being financed in part by a local firm that manages a wealthy family’s investments. Banner also obtained a construction loan from a bank.
With the inclusion of 4×4 units, which are popular with college students, the facility is positioned to cater to students from nearby Loyola University. The biggest units will be 10×30.
The project is set for completion next spring.
Second photo courtesy of LynnHappens.com